Europe at Six-Year Highs

Elena
15 Jan, 2007
New York City

European markets closed notably higher on Monday, hitting six-year highs, boosted by strong commodity sector and merger-and-acquisition news. Commodity stocks were in the spotlight, drawing some investor attention after recent oil price weakness. Among oil producers, Statoil rose 4% in Oslo trade, Royal Dutch Shell gained 1.2%, while BP added 0.5%. The U.K. FTSE 100 index rose 0.4%, the German DAX 30 added 0.4%, and the French CAC-40 increased 0.2%.

[R]1:00PM European stock markets hit six-year highs.[/R]
European markets closed notably higher on Monday, hitting six-year highs, boosted by strong commodity sector and by merger-and-acquisition news. Commodity stocks were in the spotlight, drawing some investor attention after recent oil price weakness. Among oil producers, Statoil rose 4% in Oslo trade, Royal Dutch Shell gained 1.2%, while BP added 0.5%. Aerospace company Smiths Group rallied 11.1% after agreeing to sell its aerospace operations to General Electric for $4.8 billion. The company also said that it would return 2.1 billion pounds to shareholders. Among other movers today, British Airways lost 1.5% after its cabin crew voted to take strike action. On a positive note, shares in Deutsche Boerse rose 5.3% on consolidation talk and good growth prospects for European stock exchanges. French the engineering group Alstom fell 1.6% after a brokerage downgrade. The U.K. FTSE 100 index rose 0.4%, the German DAX 30 added 0.4%, and the French CAC-40 increased 0.2%.


[R]10:30AM NY-9:30PM Mumbai, India rallies on the back of Reliance strength.[/R]
The Sensex on BSE finished 73.11 points, or 0.52%, higher at 14,129.65. The market-breadth was strong. There were almost two advancers for every decliner. For 1,749 shares that advanced, 913 declined and 45 remained unchanged. Of the 30 stocks in the Sensex, 18 advanced, while the rest declined. The turnover on BSE was Rs 4,677 crore, compared to Rs 4,585 crore. On NSE, the turnover was Rs 8,515.18 crore, lower than Rs 10,015.72 crore on Friday.

Economic news

Market regulator SEBI announced on Monday that it may allow institutions to short sell in the capital markets as early this year. Short sellers hope to profit from a stock that is likely to fall in price. Short sellers borrow a stock from a broker and hope to repurchase the stock at a later date in the market at a lower price.

The Indian government is considering reviving the defunct Over the Counter Exchange of India bourse for small and medium companies. After the National Stock Exchange and the Bombay Stock Exchange, foreign stock exchanges are now considering equity stake in the bourse.

Trading highlights

Reliance Industries was the most-active stock with a turnover of Rs 165.78 crore followed by TCS and IFCI. Index heavy Reliance Industries jumped 1.93% to Rs 1,366 on the hope that company will announce a stock-split along with its quarterly results on Thursday. Reliance is expected to report a 26% increase in quarterly earnings on strong margins from petrochemicals.


Advancers

Tata Steel led the advancers, up 4.36% to Rs 487.80, on reports that the company may soon propose a new bid for Corus. HDFC Bank surged 2.70% to Rs 1,092, on a high volume of 2.90 lakh shares.


Other gainers included L&T up 2.69% to Rs 1,507.20, Ranbaxy Laboratories adding 2.26% to Rs 430.50 and Reliance Energy advancing 1.61% to Rs 533.25. Tata Motors edged 0.66% higher to Rs 947 on reports that the company is likely to bid for Daewoo Automobile, Romania.

ITC also advanced 0.38% to Rs 172, recovering from a low of Rs 169.05 and Cairn India surged 5.11% to Rs 141.80, on reports of striking an agreement with ONGC to build a $340-million pipeline to transport crude oil from Rajasthan to Gujarat.

Decliners

Maruti Udyog led the decliners, 1.72% lower to Rs 904.90, on a volume of 2.48 lakh shares. Other decliners included ICICI Bank dipping 1.56% to Rs 955, BHEL losing 1.59% to Rs 2,221 and Hero Honda slipping 1.37% to Rs 732.95.

ONGC lost 0.93% to Rs 916.25. ONGC will offer stakes in its deepwater blocks off the east coast to a number of companies all over the world. Reliance Communications declined 0.81% to Rs 430.25. The company intends to list its wholly-owned Flag Telecom unit on the London Stock Exchange to raise $500-$550 million.

Sterlite Industries shed 0.80% to Rs 536.50, despite the fact that fiscal third quarter 2006 consolidated net profit surged to Rs 1293 crore, compared to Rs 395 crore a year ago.


[R]9:30AM NY – 2:30PM London FTSE gains on Smiths sale to GE.[/R]
By mid-afternoon, the FTSE 100 in London advanced 26 points, or 0.42%, at 6,266.

Advancers

Smiths Group jumped 11.9% higher as it confirmed plans to sell its aerospace division to US conglomerate GE for 2.4 billion pounds. The company said it would return $1.1 billion of the proceeds to shareholders. The news boosted fellow defence stocks Meggitt, up 4.7%, and Cobham, 3.6% higher. BAE Systems was also 1.98% higher and Rolls-Royce gained 2.31%.

Elsewhere, Vedanta Resources gained 2.2% as its Q3 earnings beat expectations. Takeover speculation pushed utility group Scottish & Southern Energy 2.7% higher.

Aviva, the life assurer, gained 1.6% as Credit Suisse lifted its rating from neutral to outperform. Amonf mid-caps, Carillion rose 4.4% as the support services group raised profit guidance for the year.

CSR, the Bluetooth chipmaker, was 1.6% higher after it said the purchase of two smaller rivals would allow it to make components for satellite navigation computers more cheaply.

Decliners

There were very few decliners. Digital video surveillance group March Networks plunged 36.34% after it said lower than expected orders from its largest customer would hit full year profit and revenue.

Sports Café shares slumped 28% as the themed bar operator confirmed that takeover talks had ended and admitted it was seeking to raise additional funding.


[R]7:30 AM Asian markets finish higher buoyed by financial stocks in Japan, China.[/R]
Asian markets closed higher on Monday. The Nikkei Index in Japan closed the day 0.9% higher at 17,210. Banks surged on expectation that higher interest rates would improve the spreads they can charge on loans. Sumitomo Mitsui Financial rose 3.3%, Towa Bank advanced 5.6%. Among brokerage shares, Nikko Cordial closed 3.3% higher while Mitsubishi UFJ Securities added 2.5%.

The Hong Kong Hang Seng Index advanced 2.3% to 20,069. Property and China-related companies shone, lifted by strength in regional bourses. New World Development gained 4.2%, Sun Hung Kai Properties advanced 3.5% to and Cheung Kong Holdings added 3.3%. The Kospi Index in South Korea edged 0.2% higher to 1,391. Chip maker Samsung Electronics gained for a third consecutive session, up 1.5%. Steelmaker Posco also rose for a third straight session, finishing 1% higher on its plan to buy back shares and pay out higher dividends.

The Shanghai Composite Index soared 4.7% to 2,795. Banks recovered after recent consolidation. ICBC gained 4.5% and Bank of China surged 5.5%, while insurer China Life soared late in the session, hitting the 10% daily limit. Transport companies rallied after China cut reduced the price of domestic gasoline and jet fuel Sunday on a drop in international oil prices. Shanghai Bashi Industrial Group jumped 5.5% to and Dazhong Transportation Group soared 9.7%. Air China added 4.3% to and China Eastern Airlines closed 3.5% higher.

S&P/ASX 200 in Australia gained 0.6% to end at 5,674. BHP Billiton led the gainers on the market, up 0.6%. Woodside Petroleum and gold miner Newcrest Mining followed suit, advancing 1.6% and 2.5% respectively. Taiwan closed 0.3% higher at 7,784.


[R]6:30AM European stocks gain Monday on resource stocks, oil and paper groups.[/R]
European markets advanced on Monday. In early trade, FTSE 100 in London added 0.5% to 6,269.5, Xetra Dax in Frankfurt gained 0.5% to 6,738.74 and the CAC 40 in Paris rose 0.4% to 5,641.95.

Advancers

Smiths Group rallied 14.4% as it agreed to sell its aerospace business to General Electric and also said that it would return 2.1 billion pounds to its shareholders. Oil firms BP and Total rose more than 1% each, while miner Vedanta Resources gained 3.3%. Vedanta also posted higher third-quarter profits.

Energy-related stocks bounced back as oil prices surged back above $53 a barrel on the prospect of production cuts from the Organisation of Petroleum Exporting Countries. Prospective merger partners Statoil and Norsk Hydro led the advancers in the sector. Statoil gained 2.4%, while Norsk added 1.8%. Finnish refiner Neste Oil gained 2.6%, French group Total added 1.1% and Repsol of Spain moved 1% higher.

Papermakers and logging companies also gained helped by, the strong performance of the top two logging groups in Finland. UPM-Kymmene rose 2.6% and Stora Enso added 2.2%. SCA of Sweden climbed 2.7%.

Decliners

Power station builder Alstom of France declined 2.4% after Dresdner Kleinwort cut its rating from buy to add despite the recent strong showing of the stock.

Oil and gold

Oil prices advanced above $53 a barrel Monday on reports that OPEC may hold an emergency meeting to try to reverse the 13% drop in oil prices this year. Crude oil for February delivery gained 26 cents to $53.25 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude contract for February delivery gained 44 cents to $53.39 a barrel on the ICE Futures exchange in London. Gold opened Monday at a bid price of $625.50 a troy ounce, up from $617.72 late Friday.

Currencies

The euro continued to rise against the U.S. dollar Monday as traders awaited a number of economic reports from the U.S. later this week. The euro bought $1.2938, up from $1.2915 on Friday. The British pound advanced to $1.9647 from $1.9581 on Friday, driven by the possibility that the decision by the Bank of England last week to hike its key interest to 5.25%, could signal more increases. The dollar bought 120.56 Japanese yen, up from 120.35 yen late Friday.